The recent budget of India emphasizes the country's ambitions to become one of the main global centers of industrial production. The government announced a series of measures aimed at increasing production in key sectors such as biopharmaceuticals and semiconductors, as well as supporting small businesses. However, experts believe that around $630 billion may not be enough, and India will need to seek new markets to expand trade. Details can be found in the SCMP publication.
The initiatives were announced by Finance Minister Nirmala Sitharaman, who noted that the proposed measures address two key tasks: creating jobs for the youth, which is the largest in the world, and utilizing free trade to significantly increase exports.
Among the planned expenditures are 100 billion rupees (approximately $1 billion) for the development of biopharmaceuticals, another 100 billion rupees for container manufacturing, and 50 billion for semiconductors and displays. The total budget has increased by 7.7% compared to the previous year.
Sitharaman emphasized that the government is focused on developing manufacturing in seven strategically important sectors, including biopharmaceuticals, electronics, and rare earth magnets. There are also plans to create three chemical manufacturing parks to reduce dependence on imports.
In addition, the authorities announced plans to restore 200 existing industrial clusters to enhance efficiency, create five regional medical centers to develop the healthcare and tourism sectors, and build five university campuses near industrial corridors.These measures are expected to help bring the country closer to its goal of increasing the share of manufacturing in GDP to 25%, while currently it stands at about 16-17%.
Saurabh Agarwal, a partner at consulting firm EY India, noted that the federal budget highlights India's aspiration to become a global manufacturing power.
Despite the growth of investments in certain sectors such as smartphones and automobiles, India faces stiff competition from smaller countries, especially in electronics and textiles.
Over the past decade, India's clothing exports have significantly decreased compared to Bangladesh, Vietnam, and other Asian competitors, attributed to high labor costs, smaller production scales, and lack of duty-free access to key markets.
Analysts also note that the budget allocates 120 billion rupees through two specialized funds to support micro, small, and medium enterprises, aiming to create champion companies.
Manoj Purohit, a partner at BDO India for tax and regulatory services, believes that additional support measures will help attract investments.
Capital expenditures have been increased to 12.2 trillion rupees (approximately $133.1 billion), significantly higher than the revised 11 trillion, amid caution from private investors. Last year, New Delhi reduced tax incentives that stimulate consumption to protect the economy from high tariffs imposed by the U.S.
The Indian economy demonstrates stability even with U.S. tariffs reaching 50%, and is projected to grow by 7.4% in the fiscal year ending in March 2026.
Christian de Guzman, senior vice president at Moody's Ratings, stated that India's sovereign credit profile will not change significantly after the budget is adopted.
However, in his opinion, supportive measures, including the Goods and Services Tax (GST) reform, could lead to a decrease in tax revenues and increase the debt burden.
Biswajit Dhar, a professor of economics at the Council for Social Development in Delhi, believes that new measures alone are not enough to significantly accelerate industrial growth, especially in the small and medium business sector.
India already has production stimulation programs, such as the Make in India initiative launched in 2014 and the Production Linked Incentive scheme of 2020, which offers financial incentives for local manufacturers.
He also called for greater clarity regarding new initiatives, as investors involved in previous projects may find themselves confused and expect additional benefits.
In his view, while business support is important, the sector needs a new institutional framework to address systemic issues, as many companies lack sufficient collateral to obtain loans. According to some estimates, over 90% of Indian enterprises fall into this category.
Dhar added that the country should focus on stimulating demand to attract private investments.
In the new budget, the government has indicated its readiness for gradual reforms, including creating a more favorable environment for foreign investments, which analysts believe should contribute to further industrial growth.
